As Ben continues to remain infatuated with deflation, the bond market is taking the other side of the trade.
The TIPS auction today saw huge demand as bond traders pile into these bonds which are securities that are designed to reflect changes in the CPI order to protect you from inflation.
The bond market obviously is becoming increasingly concerned that Bennies upcoming QE2 will result in crippling inflation.
CNBC reported that this was the first TIPS auction that closed with a negative yield although I have not been able to confirm this.
Nevertheless, at a bid to cover of almost 3-1, there was plenty of demand.
As the dollar falls yet again today it appears that the risk of the US currency turning into piece of toilet paper is rapidly increasing.
Here were the TIPS results:
"October 25, 2010 202-504-3550
TREASURY AUCTION RESULTS
Term and Type of Security 4-Year 6-Month TIPS
CUSIP Number 912828MY3
Interest Rate 0-1/2%
High Yield1 -0.550%
Allotted at High 57.82%
Adjusted Price 105.508607
Unadjusted Price2 104.749175
Adjusted Accrued Interest per $1,000 $0.19370
Unadjusted Accrued Interest per $1,0002 $0.19231
TIIN Conversion Factor per $1,0003 1.153603720
Median Yield4 -0.635%
Low Yield5 -0.750%
Issue Date October 29, 2010
Maturity Date April 15, 2015
Original Issue Date April 30, 2010
Dated Date October 15, 2010
Competitive $28,356,500,000 $9,920,189,600
Noncompetitive $79,810,900 $79,810,900
FIMA (Noncompetitive) $0 $0
Subtotal6 $28,436,310,900 $10,000,000,5007
SOMA $0 $0
Total $28,436,310,900 $10,000,000,500
Primary Dealer8 $19,980,000,000 $5,700,782,000
Direct Bidder9 $1,793,000,000 $313,500,000
Indirect Bidder10 $6,583,500,000 $3,905,907,600
Total Competitive $28,356,500,000 $9,920,189,600"
Keep it up Bernanke! The bond market is calling your bluff: